Tag Archives: Palo Alto Software

I was amused to check in with Quora this morning and find somebody had asked me to answer “How Did Tim Berry Grow Palo Alto Software?” Obviously that’s a question dear to my heart. So here’s what I answered, which seems fitting for this blog today.

The first Business Plan Toolkit in 1988

Slowly, carefully, bolstered by good product and reviews that validated, doing a lot of coding and documentation myself, and not spending money we didn’t have.

It started as spreadsheet templates. The first of those was published in 1984 to accompany a book “How to Develop Your Business Plan,” published by Oasis Press. In 1988 I separated from that book, and redid the templates to accompany my own book when I published “Business Plan Toolkit,” released in MacWorld January 1988. All of these early products were 100% my work, my spreadsheet macros and my documentation. It helped to have a diverse background, including 10 years as a professional journalist, foreign correspondent in Mexico City, plus a Stanford MBA. I could write about business so (people told me) others could understand.

Throughout the early years I kept up a healthy consulting practice doing business plans for some startups and some larger high tech companies, plus workshops on business planning for dealers of high tech companies. Apple was by far my best client, with repeat business in consulting on business planning from the beginning until 1994 (Hector Saldana was a steady client for years, and a supporter of the business idea, and informal advisor). The consulting supported marketing expenses. There was no Internet to speak of until 1995, so the early marketing was a combination of small ads in the back of magazines and product reviews in major computer magazines.

It was a major struggle for years. I was sacrificing consulting revenues to prop up products. The motivator, for years, was “I want to sell boxes, not hours.”

My wife’s role was especially important during those long hard years. She didn’t give up on me. We have five kids and we depended financially on my consulting, but she stick with my idea of “boxes not hours” as I continued to use scarce funds to keep the product dream alive. We had some money to deal with because my role in Borland International paid off in 1986, but we were still struggling, with small houses and used cars. And by the way we’re still married as I write this in 2016.

When we moved it from Palo Alto to Eugene OR in 1992, I had three early equity shareholders (1% each) who agreed to surrender their shares because there was no value in them. My wife and I moved to Oregon because we wanted to. She said to me: “we put up with all the downside of you having your own business; let’s get the upside and move to where we want to live.”

By 1994 I was in deep trouble, with a quarter of a million dollars of unsold product stuck in retail, coming back from channels. The template products never made it. And in the words of Kathy Colder, a key purchasing executive from Fry’s, “Tim, your boxes suck.” At the worst point, we had three mortgages and 65K$ credit card debt.

Business Plan Pro circa 2000

What I did then was decide not to just repackage, but to build stand-alone product instead, dumping templates entirely. I found a local three-person programming company (Cascade Technologies, which no longer exists; its founder was Ken Barley) to take my templates and my vision and create stand-alone product for Windows using Visual Basic and an Excel-compatible spreadsheet we were able to buy as a tool, and include in the software. It added a complete interface to include the words as well as the numbers, and keep it all, even formatting and printing, inside the one application. I wrote about a third of the code myself, in Visual Basic. My vendor got a low monthly fee for 12 months, plus a percent of future revenue. We were still not able to spend money we didn’t have.

That effort was launched in 1995 and became successful as Business Plan Pro so I was able to stop consulting and dedicate myself to the business. My son Paul Berry joined me in 1998 and developed the web business with downloadable software. We grew quickly to more than $5 million annual revenues by 2000. (Paul left in 2001 and became CTO of Huffington Post in 2007 and founded RebelMouse in 2012).

In 1999 we took on a minority investment from Palo Alto venture capital, RB Webber and Associates. That was our first outside investment. In 2002 we negotiated a buyback with them because after the dot-com crash valuations had plummeted and the company was worth more to me and my family members than what an acquirer would pay for it.

I stepped aside in 2007 and asked Sabrina Parsons to become CEO while I focused on blogging, writing books, speaking, and teaching. She and the team released LivePlan in 2012 and that – a web app, SaaS, browser based has become very successful, having had several hundred thousand paid accounts already. I’m still chairman, and founder, but Sabrina and her team get a pretty free rein to run the company. Market share and awareness keeps growing and we’ve had several years of double-digit growth in revenues again, after the great recession. And it is entirely family owned.

It started one morning at 2 a.m., when I had to deliver a finished set of financials the next morning. It was 2 a.m. and I was tired and done with the financials but I had done something in either Lotus 1, 2, 3 or Excel because I use both. I don’t remember which one it was but I had done something to break the damn spreadsheet! If the financials are going to work, when you change the assumptions the balance still balances and the cash flow, and so on.

So it was 2 a.m. and I had broken the spreadsheet. I thought to myself, there is so much productizability in this. I have to be [building this out,] assumptions, inputs, outputs [and so on], so that this doesn’t happen again.

Mixergy is a collection of interviews with entrepreneurs. Andrew Warner, founder, does a great job interviewing, and collecting interviews. The goal is a collection of thoughts and stories about entrepreneurship. I’m proud to be included.

Andrew posts the complete transcript along with the interview, so it’s easier to browse. Here’s another snippet, about raising venture capital and buying them back:

But then, and this is what’s important for the story, you need compatibility with your investors. When the whole thing crashed in 2001, then we had completely different business models. Our investors needed us to have an exit, a liquidity event. Valuations were back down onto what they really were, you know, two and a half times revenues, for example, for a healthy software company.

But two and a half times revenues wasn’t enough money to make me and my wife and our family feel like we wanted to just sell the business. I had to be 10 or 20 times revenues. But, our VCs were trapped as minority investors. And they were trapped forever. I now have eight angel investments. I understand how bad it is to be trapped as a minority investor with no hope of a liquidity event. I don’t want investors, even as a minority, who aren’t happy with me or my company, so we negotiated. Their lead partner there told me later that not until the negotiations were done, “Tim, actually I can tell you now, you are our best investment for 1999.”

Andrew led me through a lot of stories: How I failed as a hippy, how we got started on the web, how we realized we needed downloadable software, how I changed my role seven years ago to open the field for a new management team, and others. This led to a Business Startup.

Question: Hello. I, along with a partner, have 20+ years combined experience in the carpet cleaning industry. After investing over 10k of our own money, we will still need an additional 30k for start-up of our own business. We are in the middle of writing a business plan for possible private investors or an SBA loan. I was wondering, on average, what sort of ROI or security is offered to the potential investor. Such as: A straight loan with repay plus interest? A percent of ownership? A percent of annual income? Or, is an initial offer usually propositioned by the investor? Also, what sort of numbers or percentages might be ‘entertained’ as an offer to possible investors looking at our 30k request? I’m sure it can vary quite a bit, but we’re just looking for an average to negotiate around. Any advice will be much appreciated.

Start by forgetting the idea of some arms-length investor you don’t already know. There are lots of reason. First is that it’s illegal, forbidden by the SEC except for “sophisticated investors.” Second, the $30K amount is peanuts in that context, it won’t happen, they won’t take you seriously. third, the legal costs on an arms-length investment are a lot more of that. One of the problems angel investors deal with is that it costs as much to invest $100,000 as to invest $2,000,000. Outside investment isn’t practical at those low levels. You need to be looking for a few hundred thousand at least, and have a plan that shows the need.

Furthermore, whatever the range of returns that private investors want, they don’t get any return at all until you sell your company. That’s what “exit strategy” is all about. Are you building this carpet cleaning business to sell it? I doubt it. Take a moment to consider the investors’ point of view. They spend the money to invest in your company and they get nothing back from that investment at all until they sell their shares. Who do they sell them to?

One of the worst deals in the world is a minority share in a privately held small company without an exit strategy. The return on that is zero.

And, realistically, do you have an exit strategy when you start a carpet cleaning business? No, of course not. You want in, not out. That’s perfectly normal. Don’t apologize for that, but realize that investors aren’t interested.

You could legally get that kind of investment from close friends or family, but that’s still not a good idea. Somebody who invests $30K to your $10K is going to expect to own a substantial portion of your business. Ultimately, the $30K isn’t that hard to get, and if you get it as investment you won’t have to pay it back but you will have to sell a substantial share of your company, and you will have to live with one or more partners, and manage another relationship like a marriage. Do you and your partner want another partner? Are you ready to get into a close relationship equivalent to a marriage? Are you ready to have an investor who will essentially be the boss of you? I doubt it. I wouldn’t.

And, by the way, I do speak from personal experience. My wife and I built our business, Palo Alto Software, without outside investment. It wasn’t easy — at one point we had three mortgages and $65K in credit-card debt — but the good side is that we have 35 employees now and healthy cash flow and 80% market share in retail, as I write this, and we own it outright. It was worth it.

if you borrow what you need instead of getting investment, you have several options:

If you want friends and family involved, do it as a loan and write it up with the correct legal documentation so that your lender has legal recourse and you have to repay the loan and therefore there is no confusion that he or she is an owner. I recommend you use one of the family lending websites, or a lawyer, to give you the right paperwork. Search also for person-to-person lending.

The SBA has some programs for smaller-size loans. Generally they loan you no more than 70% of total investment required, which would mean you’d have to put in $13K to borrow $30K, but it’s a loan not an investment, so you still own your business. You can follow up on that by going to a local bank; SBA loans are managed by local banks.

Not that I recommend credit card debt as start-up financing, but it does happen a lot. The interest rates are very stiff, but people use credit card financing anyhow because it’s easy to get.

You might also be able to get a personal loan from your local bank, assuming you have assets you can afford to risk, so you can borrow $30K from the bank.

Remember of course that borrowed money is a risk because you will have to pay it back. Still, if you needed $200K to start that business we might talk about investors, but with only $30K, like it or not, the best practical answer is to borrow.

By the way, just so it doesn’t seem like I’m dodging your question, private investors generally want very high returns. They need to believe that every $30K put into your business will pay them back $1 million or so in 3 years and $3 million or so in 5-10 years. They know that only 1 of every 10 investments (or so) will be successful, so they need to believe each one has a chance to return 100 times or more the initial investment.

Palo Alto Software’s marketing team prepared this infographic from information provided by 10,000 users of its LivePlan web application for business planning. So that’s not a random list of small business owners, but it is a list of people who have wanting to plan a new business, or grow an existing business, in common. So that, to me at least, makes this information pretty interesting.

Getting really into a new startup, when it goes well, is exciting like a clear mountain morning, like a warm spring rain, like falling in love.

Cheesy? Sure. But I’m doing it again, and loving it. I’m not just saying what people always say; I’ve been there, and I’m there again right now.

If you’re a regular here you may have noticed I dropped my normal posting rate from five per week to just one last week and this is only the third this week. One reader emailed to ask if I’m okay, which made my week, (and, by the way, if that isn’t a good reason for blogging, I don’t know what is.)

The long-term business love of my life, Palo Alto Software, is going just fine, thanks, and I’m still there a lot physically and there in spirit always. But some new startups are making me feel that spark again, the excitement of building something new.

Unfortunately, neither of them are ready for prime time yet. If you’re curious, you could go look at apps37.com but that’s just a bare-bones placeholder, and doesn’t say much.

And, because these have come up in twitter lately, I think I should clarify that neither of these startups is either LiftFive or Rebelmouse. Yes, the founders of those two, @meganberry and @teamreboot, respectively, are two of our five grown-up children. And I’m pleased that they occasionally share ideas with me. But those two startups are their things, not mine.

If you’re a regular reader you know I don’t normally do sales pitches here on this blog, but this is special. Last week Palo Alto Software introduced a brand new version of Business Plan Pro incorporating (finally) my Plan-as-You-Go Business Planning ideas into the mainstream of the software.

With this new version, when you start a new plan, Plan as You Go is the first choice for setting up a simple, practical, management-oriented business plan. Not the whole big formal document plan, but just what you need to run a business with. That’s the key screen above (with my annotations in red):

Now the new built-in option is exactly what I suggested in the book: a streamlined, practical outline, shown here on the right. Of course you can add more later and eventually make a larger business plan, but you do that as the business plan events happen, not before. So you add the embellishment, like description of management team, or exit strategy, only when you need it. Which is great, because a lot of people really don’t need it.

I wrote the book in 2008, but because we’ve been busy with liveplan, the new online web business planning, our mainstream software had to wait. So now I’m celebrating that it’s finally here.

We’ve also added a lot of video at many different points, so that – if you’re online – you get me talking about what you’re looking at, in very short snippets. That’s hard for me to watch, frankly, because I’m as self-conscious as anybody else … but as an author, I love the opportunity to talk to you while you’re working with what I wrote.

This is the 12th version of Business Plan Pro since the first one was published late in 1994, and actually hit the shelves in 1995. We’ve come a long way since the first one – it’s still my business planning advice, but I wrote a third of the code in the original, and now there’s a team of a dozen programmers – which makes it way better.

And, by the way, if you prefer an online version, or you’re a Mac user, there’s also a lot of my methodology and my instructions in the new online planning web app at www.liveplan.com.

For more information click here for the website or call them toll-free at 1 (800) 229-7526.

I’m a bit embarrassed about this story. It’s about lying. You’ll see if you read on that it wasn’t bad lying, not tricking anybody for any bad reason. But it’s a true story, so I’m posting it here because 1.) it might be useful to somebody; and 2.) I’m curious about how often it happens.

Did you ever see the television commercial where the one small business owner changes his voice on the phone to sound like different people? I did something like that for years. I answered the business phone as Evan Rocha, not Tim Berry. (If you know me well you’ll guess how I came up with that name; and if not, it doesn’t matter. )

It started when I was a one-man company. I’d done the software and the manual and the advertising, and I also took the calls. I didn’t answer the phone as me because I felt like that would be bad for business. Right or wrong, I thought there’d be an image problem, or a lack of confidence. So I became Evan.

Later, even after the company grew up, long past the early days when I had to take calls, I still took tech support and sales calls often. I did it sometimes for special case problems, sometimes to fill in when we were understaffed, and sometimes because the phone got past the fourth ring and I wanted it answered.

I like talking to customers. I always have. And it’s something every business owner should do, and especially software or web entrepreneurs. You should really talk to your customers regularly. But having the president answer the phone feels weird, so I kept using the name Evan.

It’s been several years since I was last on the phone as Evan, so I thought it would be okay to share that now. And if you happen to be one of the customers I talked to as Evan, I didn’t mean to be deceitful and I apologize for lying. It just reduced the awkwardness. But yes, that was me.

Are you an entrepreneur, or small business owner, who’s done that? I’m curious about how many others there are.

There I was, minding my own business, watching my twitter flow, contemplating my next blog post, when what should appear in my twitter but … well, you can see it here to the right, in the Tweetdeck version: mommyceo is Sabrina Parsons, my second of five grown-up children, who has been running Palo Alto Software for the last four years. So I clicked the link to see what she wrote. We do talk a lot, of course, and we’re still in the same company, but I’ve been traveling, and I wasn’t aware of this one. She called her post Family Business Succession: four years later.

She writes (and the “he” in this is me):

He talked to me one day, and the next day, without much planning, or transition strategies, or anything, he told me and then he announced the change to the whole company.

That’s true. I did. She also credits me for staying out of her way:

Does he actually let us make the decisions? What happens when he doesn’t agree to the decisions? What does he do now? The simple answer to the question is yes, Tim actually did back off, and stay true to his word.

And that makes me proud. It isn’t easy. You build a company up and you get used to running things, and that’s a hard habit to break. Me and my ego like to think that my every opinion should be treasured, but they aren’t. The novelty wore off and then it took some real adjustment. Fortunately, I passed the baton to a strong woman with a lot of confidence in herself and a good team.

Sabrina’s post details some of the accomplishments. The company has done just fine for the past four years, after the big transition. We both have the right to be proud.

My biggest insight for others in similar situations is what I call the safe harbor concept. I didn’t just pass the command on and then sit around back-seat driving. I passed the command on and dove head first into blogging, twitter, speaking, and teaching. I didn’t want retirement. I love business, entrepreneurship, and business planning, so the change meant being able to do more of that. Without my having a lot of stuff to do, stuff that I think is important, I would have gone crazy; and probably I would have driven my daughter crazy, too.

It’s about time that business writers, assorted experts, entrepreneurs, academic and the rest start focusing on the huge damaging and wasteful misunderstanding that most of us have contributed to: that completely out-of-date idea that a business plan is a document, done once, related to raising money.

So I’m delighted to see Seth Godin jumping onto this issue with a good restatement of the problem and an infusion of new ideas to shake us up. His modern business plan post on his blog Monday starts with a quick but very real problem:

It’s not clear to me why business plans are the way they are, but they’re often misused to obfuscate, bore and show an ability to comply with expectations.

The most important word there is “misused.” Because that’s the myth of the business plan. Case in point: last week a journalist asked me if we had “an official business plan” for Palo Alto Software. That was his phrase, not mine: “official.” As in formal. Static. Left somewhere in the drawer.

Somebody on Twitter asked me what I thought of Seth’s post, thinking, I’m only guessing, that I’m in favor of the more traditional business plan. No way. I love the new thinking. It’s right in line with what I’ve been posting for several years now.

There’s no such thing as an official business plan, but the idea highlights the misuse. People spending months developing documents instead of businesses. That’s waste.

It should be business planning, a process, reviewed and revised regularly, a tool for managing and steering a real business.

Seth’s recommendation is excellent. Let’s shake the old expectations up, change the expectations, change the arrangement… and what he recommends doesn’t do anything but enhance the real business purpose of business planning.

His recommendation? A new standard order of plan documents:

I’d divide the modern business plan into five sections:

* Truth
* Assertions
* Alternatives
* People
* Money

He goes on, in the post, to talk about each of those sections. Excellent suggestions. His new order would make a great business plan.

From my point of view, this suggested reordering is nothing but positive. The business plan is just step one of planning; it’s about managing change. It’s not a sales brochure. It’s not a pitch to investors. It’s not even a plan; it’s planning. It’s about managing change. It’s about optimizing, prioritizing, setting long-term goals and short-term steps, with metrics and tracking. Why not put it in this order?

If nothing else, at least it shakes up that mythological business plan that so many people are tempted to misunderstand and misuse. And there’s no downside to it.

Read his post. See what you think. And if you read my stuff on business planning, I think you’ll find I’ve always been in favor of flexible one-of-a-kind business plans, as part of planning process. It fits perfectly with my work on business planning, including the two highlights of my recent work: Plan-As-You-Go Business Plan and Business Plan Pro.

In the retail business you have some companies who live on copying packaging. They put imitation products inside imitation packages to fool people, so they get the wrong thing. I hate that. How do they live with themselves?

But it’s not illegal.

And it’s also the history of innovation. From VisiCalc to SuperCalc to Lotus 1-2-3 to Quattro Pro to Microsoft Excel, copying makes things better. From CP/M to DOS to Windows, copying makes things better. The original Macintosh operating system borrowed from an earlier mouse and window system developed by Xerox. The iPod was not the first MP3 player, nor is the iPad the first tablet computer. These were not new ideas, but they were improvements.

And all the cool new phones now are copying the iPhone.

Do we hate the people who copy ideas? We all do it. Kids learn their moves in sports by copying other kids. We learn to write better by copying writing we like. We learn to get along with people by copying people.

The entire history of human creativity is built on copying. What, if not copying, is the cause of those identifiable periods in music and art and writing, like the Baroque or Renaissance? What except copying makes Gothic cathedrals? Try to name a good movie that didn’t borrow from some earlier movie. Even Shakespeare was often redoing older classical themes.

And yet, when I look at all the stuff in the market that’s copying something else, it makes me mad. Do your own thing. Be original. Make it better. Don’t just copy my thing. Even if it’s barely legal, it’s still sleazy.

A lot of great art starts with copying, borrowing themes, ideas, and so on. But business, starting with one idea and adding to it, making it better, creating new things based on old things, that’s progress. Business copying, looking like somebody else just to steal some respect, is just bad business.

I’m glad cool new innovations based on existing stuff succeed. I hope all sleazy business copies fail.